The winding down of two decade-long wars, fiscal restraint, stronger than forecast economic growth, hence higher tax receipts, and higher tax rates, have all contributed to a very significant decline in government red ink.

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And it certainly has defied conventional wisdom in Washington that wrongly suggested that such a turnabout was even remotely possible.

Recall the prevailing wisdom on budget deficits just five short years ago. This report from the Washington Post, July 24th, 2010, suggests that trillion-dollar deficits would become the norm after "The Great Recession," not the exception:

"The latest forecast from the White House budget office shows the deficit rising to $1.47 trillion this year, forcing the government to borrow 41 cents of every dollar it spends. Contrary to official projections, the budget gap will not begin to narrow much in 2011, because of an unexpectedly big drop in tax receipts … The White House predicted Friday it will not dip below 8 percent until the end of 2012."

CBO projects deficit to fall: Report

The Congressional Budget Office is cutting its estimates of the U.S. deficit to $492 billion due to lower-than-expected Obamacare premiums, reports CNBC's Eamon Javers.

Oops! The deficit peaked in 2009 and has been on a rapid downward trajectory ever since.

Rather than being stuck at 8 percent of GDP, the Congressional Budget Office is now projecting the deficit to fall to 2.8 percent of GDP this year, or $492 billion. That's down 32 percent from last year and next year, the shortfall is projected to shrink further, to $469 billion. The CBO is, however, forecasting a return to trillion-dollar annual deficits by 2022.

So why isn't the falling deficit getting the cheers it is due? Barack Obama, Harry Reid, John Boehner and Paul Ryan should be fighting to take credit for tackling what was an intractable economic, and political problem. Yet, no one — NO ONE — is taking credit! Instead, it is barely getting a grudging acknowledgement that, once again, the most dire predictions of the doomsayers have not come to pass.

There has been no explosion in interest rates, no crash in the value of the dollar, no wholesale dumping of U.S. Treasury bonds by nervous Chinese, Japanese, Middle Eastern, British, or Dutch investors. Quite the contrary! By and large, they all remain willing holders of U.S. debt, thanks to the belief that, unlike Greece, Portugal, Spain, Italy, and maybe even China one day, they WILL get their money back.

On the domestic front, certainly, the big decline in the deficit, at least partially, invalidates the drive-by deficit hawks to further reduce the size of government and wipe away demonized democratic programs. So, the right wing would be hard-pressed to push its austerity agenda, if it acknowledges this obvious success.

In addition — and here may be the real rub for Republicans — cost-savings resulting from The Affordable Care Act, aka, Obamacare, are, in part, responsible for a drop in the nation's red ink, according to the CBO's latest estimate. Say it isn't so, Joe!

Ironically, the White House and Congressional Democrats are also not making hay while the sun shines. The left, if it acknowledges that compromise with Republicans actually produces results, would face a backlash within its own ranks. That, in large part, is because its own pet projects were cut and the world did not come to an end. Smaller government is indeed warranted and needed, but Democrats refuse to accept sensible reforms to entitlements and the tax code. A move on those two fronts would be a logical and, indeed, necessary next step toward fiscal balance, but the Democrats refuse to budge.

In truth, both sides would feel the heat from the extreme wings of their parties if they acknowledged that government, and compromise, is actually working!

More broadly, the fact that annual deficits have been cut by a trillion dollars simply doesn't square with the notion that there is too much wrong with America — and with Washington. While that is an understandable form of post-traumatic stress disorder (something we're all feeling after two big booms and two big busts in the last 20 years), that perception quite simply doesn't square with reality.

What also doesn't square with reality is the notion that the U.S., as Bridgewater's Ray Dalio describes it, is going through a "beautiful de-leveraging," a reduction in all forms of debt that, while painful, is rebuilding the country's economic foundation, not destroying it, as many claim.

Balance sheets, across the spectrum in the U.S.,are far healthier than they have been in years. Banks have a couple trillion dollars in excess reserves, and are far better capitalized than their foreign counterparts. Corporations are sitting on over $2 trillion in cash. Household balance sheets have been de-levered significantly, while household net worth is at a record $80 trillion!

The U.S. budget deficit is down and will likely get smaller in the years to come, despite what the prophets of doom continue to have to say. As I mentioned a few weeks ago, some savvy Washington insiders are suggesting the U.S. could run a budget surplus within a couple years. Wouldn't that be a welcome surprise!

This is a week that, in religious terms, is entirely about rebirth and renewal. That is something we are experiencing in America. But this can be a painful process. But it is one we should gladly accept. Spread the good news! Give thanks that our worst fears have not been realized. And tell a fellow citizen that it's OK to believe in a government that, while at times is disappointing and dysfunctional, can also occasionally do the right thing.

Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. He also delivers a daily podcast, "Insana Insights," and a long-form weekly version, both available on iTunes and at roninsana.com. Follow him on Twitter @rinsana.